In the next chapter we learn how sellers set the prices in which we pay for an item, why things cost what they do and not what they are worth. The key to prices are sellers that can sell their products as close to the cost of making the item. In a regular market, prices are the key. Businesses cannot afford to charge a higher price, customers are normally looking for a lower price and the lower the better, in today’s economy. Many customers ask the question, “What affects prices?” We learn that things happen beyond the sellers’ and buyers’ control to raise and lower prices in today’s market.
The fact that the seller on eBay would have asymmetric information on the product that they are attempting to sell could be cause for problems especially if they are selling faulty items or if they are just straight lying about the items they are selling. Our text states that there are two general types of informational problems that arise from contracting, informational asymmetries before contract negotiation and informational asymmetries during the implementation of the contract (Brickley, Smith and Zimmerman, 2009, p. 324). 3. How does eBay address these problems? One way eBay addresses this problem is with The Feedback Forum.
Lastly organizations must all seek the greatest profits meaning nothing else but profits. When these conditions are meet which isn’t often, organizations can supply goods following their own self-interests in a predictable manner to the market. Suppliers utilize the demand curve to determine the amount of productivity and the right cost for the market. The requirement that all the firms are large ensures no organizations will be able to gain more than another. These types of conditions keep firms from monopolizing the market.
A demand curve shows the relationship between the price and quantity of a product that consumers are willing to buy. In business, demand curves are useful when testing and measuring the supply and demand of certain products within a competitive market. Graphed over time, demand curves assist businesses in determining if a certain product is actually profitable at the pricing point on the curve where it is in demand. Price Quantity There are many things that influence demand of product. In Chester Zoo’s case, this could be the economic environment, as Chester Zoo are dependent on their customers and the customer generally do not have a lot of money to be able to afford the tickets to get into the zoo as well as pay for the important things they have to pay for, then the zoos money that they earn will fall because lower amounts of people are coming to the zoo.
* Market Control:- Market Control is maintained through certain aspects of the market including market share, price, and competition. This form of control is also called decentralized control. Market control is used when there is a reasonable level of competition within the market especially in the service area as well as goods. Managers compare prices and profits to establish the effectiveness of their organization. Market control is defined as “The ability of buyers or sellers to exert influence over the price or quantity of a good, service, , or commodity exchanged in a market.
Another type is the balanced vertical integration, which means that the firm owns all the components involved in the production, from the raw materials to the delivery in the market. This so-called ‘vertical integration’ is the concept of “the combination of technologically distinct production, distribution, selling, and/or other economic processes within the confines of a single firm. As such, it represents a decision by the firm to utilize internal or administrative transactions rather than market transactions to accomplish its economic purposes.” Porter (1980). It belongs to the field of industrial organization, for it is a model of structure. Our focus will be on the effects of vertical integration on the performance of firms, thus, we will consider the benefits it has for firms, but also its internal costs to the company, on the basis of flexibility, management and performance, in order to determine if vertical integration is a competitive solution in imperfect markets.
In this paper, I will be discussing the characteristics, price determination, output determination, barriers to entry, and the role in economy of each market structure. The competitive market is a market with multiple buyers and sellers trading the same products, so each seller and buyer is a price taker. Every seller and buyer agrees what is determined for that good in the competitive market. Depending on the amount that the buyers will be willing to pay, and how much the sellers will be willing to sell the products for, will determine the cost of a product. Any firm or seller that offers the product can either enter or exit the market without any limit is a characteristic of competitive market.
The strong form of the Say's law stated that the "costs of output are always covered in the aggregate by the sale-proceeds resulting from demand". Keynes argues that this can only hold true if the individual savings exactly equal the aggregate investment. While Classical economics believes in the theory of the invisible hand, where any imperfections in the economy get corrected automatically, Keynesian economics refuses the idea. Keynesian economics does not believe that price adjustments are possible easily and so the self-correcting market mechanism based on flexible prices also obviously doesn't. The Keynesian economists actually explain the determinants of saving, consumption, investment, and production differently than the classical economists.
Compare And Contrast The Key Components Of Capitalism And Socialism Capitalism and socialism are somewhat opposing philosophies in economics. Economic equality and the function of government are the primary arguments in the socialism/capitalism debate. Capitalism is a system in which individuals own almost all the economic resources and means of producing goods and services. In a capitalist society there is no government interference in the operation of the economy. The price of all goods and services depends largely on supply and demand.
Sometimes, there are many sellers in an industry and/or there exist many close substitutes for the goods being produced, but nevertheless firms retain some market power. This is called monopolistic competition, whereas in oligopoly the main theoretical framework revolves around firm's strategic interactions. (Gordon, 2009) Unique Characteristics Monopoly: • Single seller: • Market power: • Firm and industry • Price Discrimination Perfect Competition: • Infinite buyers and sellers • Zero entry and exit barriers • Perfect factor • Perfect information • Zero transaction costs • Profit maximization • Homogeneous products • Constant returns to scale Oligopoly: • Profit maximization conditions • Ability to set price • Number of firms • Long run profits • Product differentiation • Perfect knowledge • Interdependence Monopolistic Competition: • Many Sellers • Differentiated Products • Multiple dimensions of competition • Easy entry of new firms in the long run b) Explain why economic profits are zero in the